MBD2, a methyl-CpG-binding protein, is a component of the MeCP1 histone deacetylase (HDAC) complex and plays a critical role in DNA methylation-mediated transcriptional repression. To understand the molecular basis of the methylation-associated repression, we attempted to identify MBD2-interacting proteins by a yeast two-hybrid system. Using MBD2 as bait, we isolated a novel zinc finger protein, referred to as MIZF. A direct interaction between MBD2 and MIZF was confirmed by in vitro binding assays and immunoprecipitation experiments. Four of seven zinc fingers present in the C-terminal region of MIZF are required for binding with MBD2. The MIZF mRNA is expressed in all human tissues and cell lines examined. The subcellular localization of MIZF is distinct from that of MBD2, although both proteins co-localize in some areas of the nuclei; MIZF localizes diffusely in the nucleoplasmic region, whereas MBD2 preferentially localizes in major satellites. A reporter assay demonstrated that MIZF significantly abrogates transcriptional activities. This repression is attenuated by an HDAC inhibitor, trichostatin A, and is completely dependent on the interaction with MBD2. These results suggest that MIZF is abundantly present in cells and functions as a negative regulator of transcription by binding to MBD2 and recruiting HDAC-containing complexes.